Iran’s Supreme Leader Sanctions a Different Take on Oil

By Benoit Faucon

Surely some mistake? This month, the in-house magazine of Iran’s oil ministry is calling for an end to Tehran’s reliance on petroleum.

“Dependence on oil, self deception,” reads the front page headline. Was there a columnist short of copy or inspiration at the ‘Iran Petroleum’ review? Not at all. This view comes from no other than Iran’s Supreme Leader Ali Khamenei. The article was written by a staff member of the magazine but quotes the Supreme Leader at length. In the lead story, Ayatollah Khamenei says “the crude oil sales is a legacy of long years before [the 1979 Islamic] revolution.”

“Unfortunately, the country has fallen into this trap and efforts are needed to help the Iranian nation get out,” he added.

For the country’s problems, blame Mr. D’Arcy — full name William Knox D’Arcy and the man behind the discovery of oil in Iran.

Back in the early 1900s, the British businessman bankrolled an exploration effort that ultimately led to the spurring of Persia’s first oil wells. But the exorbitant concessions granted to him — the whole country’s oil fields barring the North — and the country’s subsequent addiction to oil exports are still resented by many Iranians.

In the article, Iran’s Supreme Leader calls for a radical end to this legacy, saying the option of shutting down the country’s oil wells should be considered in the future. Many economists may actually agree with his radical views.

Iran is tackling head on an age-old problem that has rattled many oil-producing countries: the so-called “oil curse” — economies where excessive amounts of petro-dollars impede any genuine development and fail to create mass employment.

For that perspective, the record $1 trillion oil-revenue scooped by the Organization of Petroleum Exporting Countries last year may not be the blessing it appears on paper. It could actually generate problems — pushing inflation to the detriment of the non-oil economy and social demands but not progress.

Among OPEC members, Iran is one of the best equipped to find a future beyond oil. While other producers such as Saudi Arabia and Angola rely for respectively 90% and 98% on oil for their exports revenue, Iran’s oil-sales dependence fell to 76% last year — down eight percentage points in four years, according to data from the International Monetary Fund.

In the magazine Ayatollah Khamenei envisions Iran as a Middle-Eastern Silicon Valley, which would “rely on science and technology and knowledge-based companies.” An Iranian oil ministry official could not be reached for comment following a request.

With escalating sanctions against Iran having already halved its oil exports, the idea may sound opportunistic. That would be forgetting Ayatollah Khamenei has actually pressed for an end to Iran’s oil addiction for years.

“The day when the nation can put a seal on its wells and earn enough revenues to serve its needs through scientific accomplishments would be a great day,” the Iranian leader said at a speech back in August 2008. At the time, Iran’s oil industry was not facing the current escalation of sanctions and the oil price had just reached an all time high of $147 a barrel.

Already, Iran has had the fastest growth in scientific research of any country, between 1980 and 2010 — a rate that has accelerated since the U.S. started a new sanctions push in 1996. That’s according to Science-Metrix Inc., a Virginia-based science and technology consultancy, which uses expenditures in research in development and the volume of scientific works as a measurement.

The Islamic Republic has been adept in emulating a strategy common in Asia — buy a license for a Western technology and develop new, cheaper versions of it. It is exporting its own tractors and solar technologies to neighbors such as Turkmenistan, Afghanistan or Armenia.

But while to some degree sanctions initially supported such industrialization, the recent escalation in sanctions is now forcing many Iranian factories to close.

So if Iran wants to become OPEC’s first successful post-oil economy, solving its problems with the West may help.

Comments (5 of 8)

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Interesting article this...not what I thought of a "primitive" Iran as we so often are feed to believe.

And thanks for the insight George. I knew Iran was doing well in advancing scientifically and technologically but I learnt something new from your comments.

4:46 pm September 28, 2012

George wrote:

There is nothing new in this article. It is a fact that Iran has been diversifying its economy. Automobile production is the second biggest industry in Iran. It exports cars to 40 different countries. It just built an oil tanker for Venezuela and three others are in the pipeline.

Also, Iran is almost independent in gasoline production when just a few years ago it was importing 40% of it gasoline for internal consumption. Thus, crude oil is a vestige of more primitive years.

Khamenei has exactly the right vision for Iran. But, Obama is stuck in his pre-historic view of Iran and there is no hope for a resolution of the phony Iranian "nuclear issue," that is based entirely on lies.

11:49 am September 28, 2012

Someone wrote:

What an article!. This is the first time I think I didn't waste my time reading an article about Iran which is not demonizing the country. At last they (WSJ and entire American media) will realize that there are worthy things to report about Iran. I hope they do realize this, although I suspect their childish minds learn....

10:18 pm September 27, 2012

Wayfarer wrote:

Ditto Alex.

It is certainly refreshing to read a non-hostile and quite neutral piece on Iran. The Iranians are in fact alot more pragmatic and progressive than the propagandist western mass-media would actually have us believe. Indeed it is is this i'ndependent' (of the West) progressiveness which is a regarded as a threat to certain Western governments and its elimination at all costs is pursued. Otherwise Iran hasn't initiated hostilities against another country in over 200 years. Go figure!

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